Mining and Business: can you introduce yourself?
J.A.N: My name is Jules Alingete Nkey. I am an expert with the Government of the DRC on Business Climate. I am also Inspector General of Finance and Secretary General in Public Administration.
M&B: You have proposals to improve the Business Climate in the DRC. But let’s start with a provocative question. How did we get to this situation?
J.A.N: Because there is a lack of institutional ownership of the issue by policy makers. Ministers talk about the Business Climate, but do not understand its significance! That is my conclusion after three years of advising the government on this subject. I am also afraid that if we do not quickly proceed with this re-appropriation, our position in the Doing Business will always be on the decline!
M&B: And what are the Doing Business indicators?
J.A.N: In short, the Doing business indicators are business creation, obtaining a building permit, connecting to electricity, transferring ownership, obtaining loans, protecting minority investors, paying taxes, cross-border trade and contract performance and insolvency settlement. On all these elements, we will analyse the conditions for setting up the company, the facilities granted, the deadlines, the mechanisms or procedures put in place or the costs. I will note by the way that this takes into account all taxes, including mandatory contributions...
M&B: What is the situation in the DRC on this last indicator?
J.A.N: Catastrophic and in need of major reform! The DRC has three national tax administrations: the DGI, the DGDA and the DGRAD and 26 provincial administrations. That is to say 29, without forgetting all those who make tax deductions such as the FPI, the CNSS, the INPP, the ONEM, the OCC ! It is imperative to calm the relationship between the State and the business world!
M&B: And what exactly is legal certainty?
J.A.N: Are the investments and capital of a person who has invested his money in our country secure? And in this respect, our justice system must make an effort. There have been cases where people have come in with a million dollars in investment, and as a result of a small dispute, they are condemned to pay more than twice their investment! Justice must be done with due regard to this investor and investment protection.
M&B: What are your proposals to improve the business climate?
J.A.N: Ownership of the issue by the political decision-maker. I would also like to take this opportunity to appeal to the Head of State to make this issue a priority for his Government’s actions.
MB: What exactly does it mean to take ownership of this issue?
J.A.N: In concrete terms, this means that the business climate steering committee must be chaired by the Head of State and no longer by the Minister of Planning, as is currently the case. He must chair this committee with, around him, the relevant members of the government, namely the Ministers of the Economy, Finance, Mines, Hydrocarbons, Justice, Social Security and Transport, in particular. If decisions are taken at this level, the relevant ministers will feel more directly involved. It is the responsibility of ANAPI to monitor implementation as a technical advisory body, as is already the case. I think that would be a start to boosting things up. The current resistance is linked to the fact that the committee is chaired by the Minister of Planning.
J.A.N: Do you realize that some ministers come to these meetings wondering what they are doing there, when they are not just sending a counsellor? The press is called, ANAPI is told to follow up and that’s it! If the President of the Republic were President of the Committee... I am sure that the ministers would be there... We cannot pretend to solve the problem of unemployment, create jobs, in this way!
M&B: And what should this Committee focus on?
J.A.N: Take charge of the tax issue and start with the thorny issue of tax payments. We must no longer make superficial reforms to our tax system. Our current system of underdevelopment is a barrier to investment and by its very design generates corruption.
M&B: Are you advocating a complete overhaul?
J.A.N: Yes ! about the type of tax, the tax method and the tax rate ! In some tax systems, you report what you think is your tax. Then, the administration checks and gives its approval to the taxpayer. If the latter pays, the control becomes subsidiary. Our system works backwards. In our country, the taxpayer declares the tax and the administration asks him to pay without checking if the return is correct. The check comes after the payment. And that’s when it turns into a hassle. Not to mention that poorly paid tax officials often try to put some in their pockets and that, for the moment, the State cannot even find its way in! Control must be given a much less important place.
M&B: But beyond the control, we hear that the very mode of calculation poses a problem...
J.A.N: Control should not be based on accounting alone. But the problem with control is that it has become a system of enrichment for the tax administration and the authorities. That’s why we’re having trouble regulating this matter! In addition, this system is outdated in many countries where a much more efficient profit-based flat-rate system has been introduced. Knowing that the package is sectoral. The percentage is different if you are in services or industry for example. With this tax system, there is no need to go through the accounting system.
M&B: In which country, for example, is that already effective?
J.A.N: Dubai. There, the system has twenty different categories of packages, linked to the size of the company, the number of employees, the type of activity, etc. Depending on your category, you know how much tax you will pay over the next five years. The administration allowing itself to change your category at the end of these five years. It’s very simple, it gives a lot of visibility to the company and it avoids corruption.
M&B: What about VAT?
J.A.N: Counter-productive tax! We need to tell each other some truths. We have gone too fast... Today, all consumers pay VAT when they buy a commodity. But the problem is that the people responsible for bringing this VAT to the tax administration do not bring in all the money they have collected from consumers. VAT enriches economic operators, and fools: it is the consumers and the Congolese State!
M&B: Can you elaborate?
J.A.N: We have two types of VAT in our country: import VAT and domestic VAT. When you pay VAT on imports, the money goes directly into the State’s general account, unlike domestic VAT, which goes to the DGI, into an account allowing refunds to eligible companies. But since these companies are importers, the amount collected by the DGI is insufficient and we are unable to refund. This is the case for mining companies, for example... Did you know that some companies in the sector are now claiming hundreds of millions of dollars from the government because of this? Corrective action must be taken. A computerised invoicing system is becoming essential and tax administrations must have chips at their disposal in order to collect information.
M&B: What difference will it make?
J.A.N: It is necessary to imagine a cash register system linking the company to the VAT collector. Through this system, which already exists in some countries, the administration can easily know the amounts to be repaid. It allows it to anticipate.
M&B: Let’s talk a little bit about the One-Stop Shop
J.A.N: A one-stop shop for business creation has been created. This is the only indicator where we are correctly ranked. But corruption has again caught up with the Congolese. And if you don’t “motivate” the people working there, your file tends to drag on...
M&B: Another proposal to boost the upturn?
J.A.N: There are too many compulsory and unjustified taxes....
M&B: Which ones?
J.A.N: The FONER, the FPI, the OCC, the OGEFREM... All this contributes to the inflation of the prices. The mission of the OCC falls within the competence of the customs authorities. It must be removed. All this bureaucracy is useless.
M&B: And the FONER?
J.A.N: Let’s talk about it! When you bring the vehicle to Congo, you bring fuel, you pay the Foner, which is the national body, and there is already a special road traffic tax to maintain and build roads. Are roads maintained in this country? Where does the $10 million or $20 million raised each month go? Bureaucracy! Board of Directors! Direction that rides a carriage... But what about the roads in all this?
M&B: The FPI?
J.A.N: The FPI is more than 30 years old. The State has transferred its prerogatives to levy a tax called TPI to the FPI by entrusting it with the task of setting up a fund to finance industrial projects. Today, when we take stock of these 30 years of collection, we have a zero result. This billion has been squandered on bogus projects and unnecessary bureaucracy!
M&B: Do you advocate denationalization of public companies?
J.A.N: I am a liberal, and I think the state should let the private sector do the business. That is the general rule. But there are key areas where the government cannot fully disengage.
M&B: In conclusion, how can we quickly change the national consciousness?
J.A.N: The Congolese are up to the challenge. If we end recess, everyone will line up quickly. But it has to come from above and we have to start by populating the prisons with those who looted the state. If there are no flagship measures, if there are no shock decisions within three months: it’s over! The hope that has arisen from the elections will melt away and that will give way to despair. The Head of State must send a clear message.